God's Tax Subsidies

By Matthew Yglesias
Posted Tuesday, Nov. 27, 2012, at 10:06 AM ET

A couple of thousand years ago, my understanding is that it was generally believed that events on the planet Earth were controlled by an array of fairly egomaniacal gods. Good weather and good harvests depended on appeasing these gods with various sacrifices, splendid temples, and so forth. And in an overwhelmingly agricultural economy, this kind of god-appeasing activity is clearly a critical public service. In a very homegenous society, you can best achieve that god-appeasing through direct state investment in the temple sector (a single-payer religion initiative, so to speak) but in a diverse democracy it would make more sense to decentralize the appeasement process by establishing a generous tax subsidy for religious activities.

And that's more or less where we are, even though the Wrath of God theory of the business cycle is largely out of favor in policy circles. Consequently, Mina Kimes ends a fascinating and wonky discussion of in-the-weeds ways to reform the charitable income tax deduction with rather blunt call to stop using the IRS as a tool to subsidize churches:

Studies have shown that the price elasticity of giving for religious donations is relatively low, which means that people would be unlikely to cut their gifts in response to a lowered tax break. Indeed, many religious donors do not currently claim a deduction.

If the government is serious about saving money, then it should consider exempting religious donations from the charitable tax break. Most people give to churches because they want to, not because they get a tax break for their generosity.